NJ Court Enforces Settlement notwithstanding “no review” status on Proposed Medicare Set-Aside

From Roger Baron (www.erisawithprofessorbaron.com)

Personal injury settlements are frequently delayed due to the belief/misunderstanding that there is a necessity of securing federal agency (CMS) approval of proposed Medicare “set aside” amounts for future medical bills. Due to Medicare’s “secondary payer” status, tortfeasors and their insurers run the risk of double exposure if a case is settled without resolution of the “set aside” issue. This quandary is exacerbated when CMS provides a “no review” response. What can be done? This new decision provides a solution.

The opinion in Duhamell v. Renal Care Group, No. L-871-09, Superior Court of New Jersey Law Division, Atlantic County, was handed down on December 7, 2012 and approved for publication by the committee on opinions this past Thursday, May 16, 2013. This case involves a mediated settlement for personal injury claims, following ten hours of mediation. The plaintiffs hired a “renowned expert” to determine the proper amount to be set aside for future medical bills payable by Medicare. The expert recommended $13,689.25 be set aside for one plaintiff and $114,246 be aside for the other plaintiff. The total amount of the settlement remains confidential. When the plaintiffs submitted the proposed set-asides for approval to CMS (“Department of Health and Human Services, Center for Medicare and Medical Services”), they received “no review” letters from CMS which stated, inter alia,

Due to resources constraints, CMS is not providing a review of this proposed liability Medicare set-aside arrangement amount. Please be advised that this does not constitute a release or a safe harbor from any obligations under any Federal law, including the MSP statute. All parties must ensure that Medicare is secondary to any other entity responsible for payment of medical items and services related to the liability settlement, judgment, or award.

In essence the parties’ settlement would be put on hold indefinitely until such time as Medicare had sufficient resources to review the claims and proposed set-aside amount. Plaintiffs decided, instead, to request judicial approval of the settlement, seeking a judicial declaration that the Medicare interests “have been adequately protected.” In addressing this issue “of first impression in New Jersey,” the court “thoroughly reviewed the sworn testimony of plaintiff’s expert regarding the proposed set-aside amounts” and found “that the proposed set-aside amount in each case fairly takes Medicare’s interests into account in that the figures are both reasonable and reliable.” The Court granted the plaintiffs’ Motion to Enforce the Settlement Agreement.

This opinion is founded upon “notions of fairness and public policy.” In particular this opinion states,

The court bases its decision today on notions of fairness and public policy. In the present case, both plaintiffs have submitted expert reports determining the proposed set-aside amounts for future medical expenses. Both reports were submitted to CMS for review, and CMS responded that they did not have resources to review the proposed set-asides. CMS does not provide any other policy or procedure for determining the adequacy of protecting Medicare’s interests for future medical expenses in conjunction with the settlement of plaintiffs’ claims. In light of the foregoing, and given the letters issued to plaintiffs lack the force of law, to require plaintiffs to force their case to trial when they have reached an amicable resolution outside of court, runs contrary to New Jersey’s strong public policy interests in encouraging settlements. Setting this type of precedent would cause a floodgate of litigation in our courts, resulting in expense and delay of the judicial process, where it would not otherwise be necesary. Such a result cannot be held to be in the interest of justice. Accordingly, the court finds it is necessary and appropriate to make a determination in the present matter.

This decision relies, in part, on the recent federal decision in Sipler v. Trans Am Trucking, Inc., 881 F. Supp. 2d 635, 637 (D.N.J. 2012) which similarly approved a settlement agreement in a situation where none of the medical bills related to the 2006 accident had been paid by Medicare because the injured plaintiff did not become qualified for Medicare until 2012. The federal court stated, “to require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements.”

The Duhammell opinion